IDEAS home Printed from https://ideas.repec.org/a/eee/finana/v91y2024ics1057521923005240.html
   My bibliography  Save this article

Interpreting the effect of global economic risks on crude oil market: A supply-demand perspective

Author

Listed:
  • Hong, Yanran
  • Cao, Shijiao
  • Xu, Pengfei
  • Pan, Zhigang

Abstract

Fluctuations in crude oil prices are widely considered to reflect changes in global economic conditions. However, recent extreme events such as the COVID-19 outbreak and the Russia-Ukraine conflict have severely weakened global economic conditions, which awakens our renewed attention to the crude oil market. Can crude oil price fluctuations still reflect global economic conditions? Different from previous studies, we aim to interpret this question by focusing on the supply-demand shocks and investigating the influencing mechanism from a dynamic perspective. First, we simply count the number and location of months when supply-demand shocks and economic conditions simultaneously changed. Results show that the response of supply-demand shocks to economic conditions may change over time. Second, the time-varying detection shows that the significant impacts of economic conditions on different shocks exist in different periods. Finally, tests based on spectral density suggest that economic conditions only have medium-term effects on supply shocks but can strongly affect demand shocks associated with economic activity in any case. Besides, we fail to provide evidence of the impact of economic conditions on the other two demand shocks. Thus, not all shocks in crude oil prices can reflect changes in global economic conditions.

Suggested Citation

  • Hong, Yanran & Cao, Shijiao & Xu, Pengfei & Pan, Zhigang, 2024. "Interpreting the effect of global economic risks on crude oil market: A supply-demand perspective," International Review of Financial Analysis, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:finana:v:91:y:2024:i:c:s1057521923005240
    DOI: 10.1016/j.irfa.2023.103008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1057521923005240
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irfa.2023.103008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:91:y:2024:i:c:s1057521923005240. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620166 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.